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Cash-for-clunkers triggers billion-dollar spending spree

American motorists have gone on a car buying frenzy, scooping up the first tranche of the billion-dollar “cash for clunkers” scheme and forcing the government to stump up more.

Details of the scheme were released only a week ago and by the weekend all of the original $US1 billion had been committed.

Transportation Secretary Ray LaHood said all sales through to Tuesday would be honoured but he warned that unless the Senate approved a $US2 billion funding extension this week, the administration would be forced to pull the plug.

The scheme officially known as CARS (car allowance rebate system) rewards owners of older, gas-guzzling cars for turning their vehicles in for a new car or truck.

Ford Motor has just announced an increase in its July sales, the first year-over-year jump in almost two years. The increase was the first reported by any of the six largest auto makers since August 2008 and the first bump up for Ford since November 2007.

Ford said the most-traded-in vehicle was a Ford Explorer and most buyers drove out with new Ford Focus.

The scheme triggered the most hectic car sales in a week seen for many years and brought accusations of governernt bungling as the CARS office struggled to keep up with registrations.

Designed to last through October, the scheme offers rebates of up to $4500 to consumers who have already bought what some estimates put as high as 250,000 new vehicles.

The original cash-for-clunkers legislation called for putting $US4 billion aside for consumers to trade in older cars for more fuel-efficient models. But lawmakers who were sceptical of the programme's success, or opposed to the additional spending, also managed to whittle the funding down to $US1 billion.

In Germany, with a population roughly one-third that of the US, the government committed the equivalent of $US7 billion to entice drivers to get rid of older cars and buy new, more-efficient models.

That programme has been such a success that it could run out of money by September.

Comments and questions

Yes, Your vehicle must be less than 25 years old on the trade-in date